U.S. President Donald Trump may be unhappy with Federal Reserve Chairman Jerome Powell, but he has no authority to remove the central bank head from office, Morgan Stanley said.
His renewed focus on the "neutral" level of interest rates as a potential turning point for policy that until now has been on a steady tightening path is echoed by the minutes.
In its most recent projections, the Fed forecast that it would raise rates in December for the fourth time this year, followed by three more hikes in 2019. The benchmark fed funds rate, at 2.00-2.25 percent, is within a quarter of a percentage point of the bottom of the Fed's estimated range for neutral, but is also several quarter-point rate hikes below the mid-point estimate of 3 percent. Salesforce.com surged 10.3 percent.
The Bloomberg Dollar Index sank the most in two weeks, fueling speculation its two-month rally may be over.
Elsewhere, the pound held gains after reversing losses sparked by the Bank of England's warning that a no-deal Brexit could spark a recession.
The Fed chairman said the economic outlook remains "solid", bolstering expectations for a rate hike when the central bank meets next month, but he noted that the effects of higher rates take time to show up in data. "If the Fed pauses next year, it will have nothing to do with the message that the president has said to them", she said. While the central bank is widely expected to lift rates, his comment was a far cry from his characterisation last month of them being "a long way from neutral".
"So Chair Powell is here to stay. Now investors are true believers - and are reacting accordingly". US-China trade issues could also dominate the Fed's narrative, he added.
Terminal subscribers can read our Markets Live blog.
All eyes will now be on the Federal Open Market Committee's final gathering of this year on December 18-19 to glean further clues on what may happen. The Dow closed the month with a 1.7 percent increase, the S&P 500 advanced 1.8 percent, and the Nasdaq eked out a 0.3 percent rise.
Still, lingering caution that the two sides would leave the summit without an agreement capped gains in Europe, where auto stocks were under pressure after a report Trump may soon impose new import tariffs.More news: Deontay Wilder retains WBC heavyweight title after thrilling draw with Tyson Fury
That comment, which came just days after Trump's latest criticisms, was well-received by markets: USA stocks surged, with the Dow Jones Industrial Average and S&P 500 flipping into positive territory for November.
USA crude rose 2.31 percent to $51.45 per barrel and Brent closed at $59.51, up 1.28 percent on the day.
The Stoxx Europe 600 Index was little changed.
The euro advanced 0.7 percent. UnitedHealth Group rose 2.6 percent.
The British pound gained 0.6 percent.
The Dollar/Yen is trading lower early Friday with the price action being primary driven by lower U.S. Treasury yields.
Germany's 10-year yield was steady at 0.35 percent.
The U.S. two-year Treasury yield extended a modest decline from the previous day following Powell's comments.
West Texas Intermediate crude fell 2.1 percent to $50.45 a barrel.